SENATE BILL REPORT

SB 5982

BYSenators Johnson, Smitherman, Sellar, McCaslin, Conner and Matson

Regulating underinsured motorist coverage.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 23, 1989, July 12, 1989

Senate Staff:Walt Corneille (786-7416)

AS OF JULY 12, 1989

BACKGROUND:

A motor vehicle liability policy must provide coverage for underinsured motor vehicles causing bodily injury, death, or property damage.  The person insured or the spouse of that person may reject all or part of the underinsured motorist coverage only if it is done in writing.  If the insured or spouse rejects underinsured motorist coverage, it may not be included in any supplemental or renewal policy unless it is specifically requested in writing.  The amount of the coverage offered for underinsured motorist coverage must be the same amount as the insured's liability coverage.

An underinsured motor vehicle is defined as a vehicle where no bodily injury or property damage liability bond or insurance policy is in effect at the time of the accident or where the sum of the limits of the liability under all policies or bonds is less than the damages which may be legally recovered.

Underinsured motorist coverage need not be offered in conjunction with general liability policies or other policies that merely provide excess coverage on the insured vehicle.  If an insurer has other insurance available in other policies that total limit of liability of all the coverages may not exceed the higher of the limits of the various coverages.

SUMMARY:

Motor vehicles to which the requirement to offer underinsured motorist coverage applies must be those designed for use on public highways and that are required to be registered in the state of Washington.

Underinsured motorist coverage does not apply until the limits of all bodily injury or property damage liability bonds or insurance policies which cover the underinsured vehicle have been exhausted in full through payment of a judgment or settlement.  Proof of the payment or judgment must be submitted to the insurer providing the underinsured motorist coverage.

An applicant as well as a spouse or insured may reject the underinsured motorist coverage which must be offered.  If an insured or spouse has rejected part of the underinsured coverage neither the insurance company or its affiliates are required to notify the insured when it renews or replaces the policy as to the availability of any higher limits of coverage.

If more than one policy applies to a loss, an order of priority is established.  The first priority is a policy covering the motor vehicle occupied by the insured person at the time of the accident.  The second priority is a policy covering a motor vehicle which is not involved in the accident but in which the injured party is a named insured.  The third order is a policy covering a vehicle not involved in the accident in which the injured person is an insured other than the person named in the policy.  The coverage available under a lower priority policy will apply only if it exceeds the coverage of a higher priority policy.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested